Malaysia’s Etiqa Targets Insurance Growth

Etiqa Insurance, one of Malaysia’s largest composite insurers and
takaful providers, is considering further merger and acquisition
activity going forward to boost its business, both locally and overseas.
Etiqa is a joint venture insurance operation that was formed in 2007
by a merger between Malaysia National Insurance and Takaful Nasional.
The company is 69.05 percent owned by Maybank, with Ageas Insurance
International holding the remaining stake. Etiqa now distributes
conventional insurance and Islamic takaful proucts under a unified brand
name. The company has progressed quickly since its inception and now
believes it could vie for the top spot in the Malaysian insurance industry.
Etiqa officials outlined the company’s business ambition through a
series of media events in the past week. The Malaysian insurance
conglomerate wants to become the overall industry leader by 2015 and
intend to leverage their position as the country’s largest takaful
distributor and to continue developing a fast growing conventional life
insurance business to meet these objectives. Etiqa expect their overall
gross written premiums to amount to MYR7.5 billion (US$2.37 billion) by
2015, up from the MYR4.3 billion (US$1.36 billion) projected for this
year. Etiqa Chief Executive Officer, Hans de Cuyper explained to the press that
hitting these premium targets was achievable given the Southeast Asian
country’s growing appetite for insurance and investment solutions.
“Based on our own extrapolation, we can be the largest insurer by 2015
by growing top line to MYR7.5billion from MYR4.3billion currently. That
alone will be sufficient to be at the top,” de Cuyper said.
Etiqa’s current premium levels place them as the number two insurer
in Malaysiam behind market-leading Great Eastern Life, who project
MYR5.6 billion (US$1.77 billion) in gross written premiums for 2011.
Despite trailing Great Eastern, Hans de Cuyper told reporters that there
was plenty of space in the Malaysian insurance market to expand and
that the company remained in a solid fiscal position to facilitate
growth. “It is definitely an achievable target for us considering our
solid financial strength and as we increase our GWP from MYR2.8 billion
(US$886 million) in 2006 to MYR4.3 billion (US$1.36 billion) this year,
making us a strong number two in the market,” he said. The sovereign
financial woes affecting the US and the Eurozone are not expected to
have a negative impact on the group’s investments.
Through 2012, Etiqa plan on gaining market share through the
development and launch of various new life and family insurance products
in Malaysia. This reflects an overall industry trend in the country,
which has seen life and family protection products become increasingly
more popular, as more people look to cost-effective savings and
investment-linked solutions, over just general insurance. A new study
released last month by ING Insurance Berhad
revealed that 83 percent of all Malaysian consumers believe that there
was a greater need to protect their lifestyles now than compared to just
12 months ago. Rising healthcare costs and lifestyle expectations has
enabled the attitude towards and awareness of insurance to change
quickly. Overall, the rise in income, healthcare, education and housing
opportunities across most of Asia, have given families in the region
greater access to a lifestyle they would now like to protect.
Etiqa is also working to upgrade its infrastructure, optimize
operations and implement bold new marketing strategies to humanize
insurance and takaful for a still largely unaware Malaysian populace. By
year’s end, the company is also aiming to secure a wealth management
license under the private pension framework, which was announced as part
of Malaysia’s 2011 Budget. In addition, Etiqa remain open to growing
their operations in Malaysia either organically or through mergers and
acquisitions with smaller domestic players, but as de Cuyper explained,
this would depend on market circumstances going forward. “If any
potential acquisitions can add to our strength, fit into our financial
ambitions and culture, then we may consider it,” de Cuyper said.
Any upcoming acquisition activity for Etiqa will likely come through
the company’s dominant takaful branch. Etiqa Takaful has been at the
forefront in the development of the takaful insurance industry in Malaysia,
and could become the first company of its kind in the world to exceed
MYR2 billion in annual Islamic contributions this year. Etiqa Takaful
command roughly 45 percent of the domestic takaful market at present and
have also now established Islamic insurance operations in Brunei,
Singapore and Pakistan as well. According to Etiqa Takaful officials,
Indonesia has been earmarked as the next likely destination, and could
become part of the Islamic insurer’s regional portfolio by the middle of
2013. After gaining almost half of the takaful market share in Malaysia
it has become important for the company to balance its insurance
business through further acquisitions. Indonesia offers significant
potential for takaful insurance products due to its large predominantly
Muslim population. Etiqa Takaful will also be able to leverage their
relationship with Maybank, who already have a significant presence in
the country. Maybank owns a full fledged Islamic bank (PT Bank Maybank
Indocorp) and a full fledged commercial bank (Bank Internasional
Indonesia) in Indonesia. Through their affiliation with Maybank, Etiqa
thus gains an extensive regional distribution network, to aid sales of
their bancassurance and takaful insurance products. “With an institution
like Maybank behind us, we are definitely going to achieve and maintain
our leadership in takaful and insurance,” de Cuyper said.
The takaful insurance market has become an important business line
for multinational insurance companies searching for new sectors and
opportunities for growth. In April, Ernst & Young’s World Takaful Report
forecast the takaful market to be worth US$12 billion in 2011, growing
31 percent from US$9.15 billion in 2010. Key takaful markets are
characterized by low insurance penetration rates and comparatively high
rates of economic growth. Major foreign insurers have duly taken note of
the huge growth potential from this brand of products. While the
outlook in more established international markets remains quite static,
demand for takaful insurance products, targeted towards predominantly
Muslim populations in Middle-East, North Africa and South Asia, has
grown significantly, particularly in Indonesia, Qatar, Saudi Arabia, the
UAE and, of course, Malaysia